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Financial Report for the half year ended 31 December 2013
Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000CZA6
JSE/ASX/AIM share code: CZA
("CoAL or the "Company" or the "Group")
FINANCIAL REPORT
FOR THE HALF YEAR ENDED
31 DECEMBER 2013
CORPORATE DIRECTORY
REGISTERED OFFICE Suite 8, 7 The Esplanade
Mt Pleasant, Perth, WA 6153
Telephone: +61 8 9316 9100
Facsimile: +61 8 9316 5475
Email: perth@coalofafrica.com
SOUTH AFRICAN OFFICE South Block
Summercon Office Park
Cnr Rockery Lane and Sunset Avenue
Lonehill
Telephone: +27 10 003 8000
Facsimile: +27 11 338 8333
BOARD OF DIRECTORS Non-executive
Bernard Pryor (Appointed to role of Chairman on 1 February 2014)
Peter Cordin
David Murray
Khomotso Mosehla
Rudolph Torlage
Executive
David Brown (Appointed to role of CEO on 1 February 2014)
Michael Meeser
COMPANY SECRETARY Tony Bevan
AUSTRALIA UNITED KINGDOM SOUTH AFRICA
AUDITORS Deloitte Touche Tohmatsu N/A Deloitte & Touche
240 St Georges Terrace Deloitte Place
Perth WA 6000 Building 1
Australia The Woodlands
20 Woodlands Drive
Woodmead 2052
South Africa
BANKERS National Australia Bank Limited Investec Bank plc ABSA Bank
Level 1, 1238 Hay Street 2 Gresham Street The Podium
West Perth WA 6005 London EC2V 7QP Norton Rose Building
Australia United Kingdom 15 Alice Lane
Sandton South Africa
AUSTRALIA UNITED KINGDOM SOUTH AFRICA
BROKERS Euroz Securities Limited Investec Bank plc N/A
Level 18, Alluvion 2 Gresham Street
58 Mounts Bay Road London EC2V 7QP
Perth WA 6000 United Kingdom
Australia
Mirabaud
21 St James' Street
London SW1Y 4JP
United Kingdom
LAWYERS Corrs Chambers Westgarth Hogan Lovells International Edward Nathan
LLP Sonnenbergs
Governor Phillip Tower Atlantic House 150 West Street
1 Farrer Place Holborn Viaduct Sandton
Sydney, New South Wales London EC1A 2FG Johannesburg 2196
2000 United Kingdom South Africa
Australia
NOMAD/ N/A Investec Bank plc Investec Bank Limited
CORPORATE
2 Gresham Street 100 Grayston Drive
SPONSOR
London EC2V 7QP Sandown 2196
United Kingdom Johannesburg
South Africa
DIRECTORS' REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2013
The Directors of Coal of Africa Limited ("CoAL" or "the Company") submit herewith the financial report of Coal of Africa
Limited and its subsidiaries ("the Group") for the half-year ended 31 December 2013. All amounts expressed in US Dollars
unless stated otherwise.
In order to comply with the provision of the Corporations Act 2001, the directors report as follows:
Directors
The Names of the directors of the company during or since the end of the half-year are:
Name
Bernard Pryor* (Chairman)
Peter Cordin*
David Murray*
Khomotso Mosehla*
Rudolph Torlage*
David Brown**
Michael Meeser**
* Non-executive director
** Executive director
The above named directors held office during and since the end of the half-year.
Review of Operations
Principal activity and nature of operations
The principal activity of the Company and its subsidiaries is the acquisition, exploration and development of thermal and
metallurgical coal properties in South Africa.
The Company's principal coking and thermal coal assets and projects include:
- The near-term development project, the Vele Colliery;
- The Makhado Project and the Greater Soutpansberg Project ("GSP") comprising three exploration stage coking and
thermal coal projects, namely The Chapudi, Mopane and Generaal Projects; and
- Two non-core thermal assets, the Woestalleen and Mooiplaats collieries which are classified as ‘Operations held for
sale'.
Operations
The Company's focus on safety continued and no lost time incidents ("LTIs") were recorded during the reporting period
(FY2013 H1: 10 LTIs).
The restructuring of CoAL continued during the period and resulted in the disposal of the Woestalleen Complex near
Middelburg in Mpumalanga. The Company satisfied suspensive conditions of the transaction and by the end of December 2013,
only the conditions requiring regulatory approval were outstanding. This was received at the end of January 2014 with the
flow of funds in March 2014. The Opgoedenhoop New Order Mining Right ("NOMR") previously formed part of the Woestalleen
Complex and was subject to a separate disposal process. The Company is awaiting regulatory approval for the transaction,
expected in Q1 CY2014.
The Mooiplaats Colliery (near Ermelo) in Mpumalanga was placed on care and maintenance in August 2013, at which time it
was producing Eskom quality coal only. The colliery is undergoing a formal disposal process which is expected to be
completed during CY2014. During December 2013 the Company agreed to sell the Holfontein thermal coal project near
Secunda, also in Mpumalanga, and received an option fee of ZAR5 million (US$0.5 million) for a one year option, extendable
for further periods on the payment of additional option fees. The Company expects the buyer to exercise its option in CY2014
and once legislative approval for the transaction is granted, the purchase price of ZAR50 million (US$4.8 million) will become
payable to CoAL.
During the six months ended December 2013, CoAL converted its interest in ASX listed Lemur Resources Limited into Bushveld
Minerals Limited ("Bushveld") shares. Bushveld is listed on AIM (London) and CoAL is in the process of disposing of these
shares, expected to be completed in CY2014.
As well as the restructuring of its various non-core assets, CoAL undertook processes to decrease overhead costs which
included a reduction in staff numbers at its corporate office as well as its projects. These processes were completed by July
2013 and together with the relocation of the corporate office in Johannesburg, resulted in significant cost savings.
A further step in the turnaround strategy required the confirmation of the Vele Colliery coal quality. During the period the
Company supplied samples of semi-soft coking coal to ArcelorMittal South Africa Limited ("AMSA") for tests in their coke
batteries. The semi-soft coking coal test results were favourable, (meeting all of AMSA's technical requirements) and in
January 2014 the Company received a Letter of Intent ("LoI") for the supply of coal. Both AMSA and CoAL wish to convert the
LoI into a formal off-take agreement dependent on agreement on pricing parameters. Furthermore Eskom, the state power utility,
successfully undertook combustion tests on Vele thermal coal and the parties are to hold further discussions with regards to
a potential off-take agreement.
In terms of South African mining legislation, the Company requires a 26% Black Economic Empowerment ("BEE")
shareholding for its mining and exploration projects. The Company is at an advanced stage of finalising agreements to
enable a broad based BEE consortium (including communities and future employees) to acquire 26% of the Makhado
Project. The Company estimates the Makhado Project Net Present Value to be in excess of ZAR6.9 billion (US$ 656.9 million)
and is planned to produce over two million tonnes per annum ("Mtpa") of hard coking coal and over three Mtpa of Eskom quality
thermal coal. The construction of the project, including ramp-up, is expected to take 26 months commencing in CY2015 and has
an initial life of mine of 16 years. The inclusion of a BEE shareholder ensures that the project has the requisite corporate
structure for the granting of the NOMR and in time, the Makhado Project will benefit one of the poorest areas in South Africa.
Vele Colliery Plant Modification
The confirmation of the Vele coal's semi-soft coking coal characteristics by AMSA during the reporting period resulted in the
scaling down of operations in anticipation of the processing plant modifications. The Company approached potential
contractors for the detailed design and construction of the modification and in February 2014, appointed Sedgman South
Africa ("Sedgman") to complete the three month front-end engineering and design ("FEED"). The FEED will enable CoAL to
arrive at a class 1 EPC estimate and once complete, will increase the processing capacity to 2.7 Mtpa of run of mine ("ROM")
coal and the simultaneous production of three products, namely:
- Semi-soft coking coal;
- Sized thermal coal for the regional market; and
- Thermal coal for Eskom.
The Vele Colliery has a life of mine in excess of 50 years. The Company estimates that it will cost approximately ZAR450.0
million (US$42.8 million) to complete the plant modification (including mine development and ramp up costs), funded by
a combination of debt and equity, and has commenced discussions with South African financing institutions which is expected
to be agreed by the end of Q1 CY2014. Plant modifications will be completed in H1 CY2015, followed by a three month
ramp-up period.
Current and future funding
During the reporting period the balances outstanding under the Deutsche Bank trade finance facility and the Investec Bank
Limited ("Investec") derivative facility were repaid. Furthermore the Company secured a ZAR210.0 million (US$20.0 million)
facility from Investec in October 2013 and has drawn ZAR107.0 million (US$10.2 million) of this for general working capital
requirements. The Investec facility will be repaid using the proceeds from the disposal of non-core assets.
The Company has a long term project pipeline and the modification of the Vele plant and the development of the Makhado
Project will be followed by the development of the GSP project areas. The development of the Company's significant coking
and thermal coal resources is expected to be funded by a combination of debt and equity.
Financial review
The loss for the six months under review amounted to US$46.3 million, or 4.42 cents per share compared to a loss of
US$111.7 million, or 14.39 cents per share for the prior corresponding period.
The loss for the period under review of US$46.3 million (2012: US$111.7 million) includes non-cash charges of US$30.3
million (2012: US$96.1 million) as follows:
- impairment loss of US$16.5 million (US$50.0 million in the six months ended 31 December 2012);
- net foreign exchange losses of US$12.6 million (2012: US$19.9 million) arising from the translation of inter-group loan
balances, borrowings and cash due to changes in the ZAR:AUD exchange rate during the period;
- depreciation of US$0.7 million (2012: US$9.8 million) and amortisation of US$0.5 million (2012: US$9.4 million)
contributed further to the non-cash charges;
- loss of nil due to the discount on early settlement of the Grindrod receivable (2012: US$2.7 million); and
- loss of nil (2012: US$4.3 million) on the fair value adjustment of the Investec equity derivative financing package.
As a result of the exclusion of impairment losses from the headline earnings calculations, the headline loss per share (as
explained in note 12 to the financial report) reduced from 7.95 cents in the prior corresponding period, to 2.85 cents per
share during the six months under review.
As at 31 December 2013, the Company had cash and cash equivalents of US$4.2 million compared to cash and cash
equivalents of US$29.9 million at 30 June 2013.
Authorised and issued share capital
CoAL had 1,048,368,613 fully paid ordinary shares in issue as at 31 December 2013. The holders of ordinary
shares are entitled to one vote per share and are entitled to receive dividends when declared.
Dividends
No dividends were declared or paid during the six months.
Highlights and events after the reporting period
- On 31 January 2014, the Department of Mineral Resources ("DMR") granted Section 11 approval in terms of the Mineral and
Petroleum Resources Development Act ("MPRDA") for the disposal of the Woestalleen Complex. The sale consideration of
ZAR80 million (US$7.6million) was received on 6 March 2014.
- David Brown was appointed as Chief Executive Officer ("CEO") and Executive Director and Bernard Pryor was appointed
Chairman, effective 1 February 2014.
- Appointment of Sedgman as the engineer for the FEED of the Vele Colliery plant modification.
Outlook
Good progress has been made on all elements of the turnaround strategy. The placement of the loss making Mooiplaats
Colliery on care and maintenance and the commencement of a formal sales process, as well as the disposals of the
Woestalleen Complex, Holfontein project and Bushveld investment are at various stages of completion and are all expected
to be completed during CY2014. The confirmation of the Vele Colliery semi-soft coking coal qualities by AMSA could, subject
to the requisite funds being raised, result in the commencement of the project's processing plant modifications,
expected to be completed in H1 CY2015. The granting of the Makhado Project NOMR is expected to occur in CY2014 with the
26 month construction period commencing in CY2015, again subject to the required funding being available.
Rounding off of amounts
The company is a company of the kind referred to in ASIC Class Order 98/100, date 10 July 1998, and in accordance with
that Class Order amounts in the directors' report and the half-year financial report are rounded off to the nearest thousand
dollars, unless otherwise indicated.
Auditor's Independence Declaration
A copy of the auditor's independence declaration as required under Section 307C of the Corporations Act 2001 is set out on
page 28.
The half-year report set out on pages 8 to 27, which has been approved on the going concern basis, was approved by the
board on 9 March 2014 and was signed on its behalf by:
David Brown
Director
Dated at Johannesburg, South Africa, this 9th day of March 2014.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE HALF-YEAR ENDED 31 DECEMBER 2013
Six months Six months
ended ended
31 Dec 2013 31 Dec 2012
Note $'000 $'000
Continuing operations
Revenue 60 516
Cost of sales (76) (898)
Gross loss (16) (382)
Depreciation and amortisation (1,286) (498)
Foreign exchange losses (12,564) (19,857)
Employee benefits expense (4,116) (7,477)
Other expenses (5,759) (10,448)
Take or pay port obligation (1,549) (1,626)
Operating lease expenses (174) (545)
Other (loss) and gain - (4,299)
Other income 388 -
Operating loss (25,076) (45,132)
Interest income 371 353
Finance costs (285) (8)
Loss before tax (24,990) (44,787)
Income tax credit / (charge) - -
Net loss for the period from continuing operations (24,990) (44,787)
Operations held for sale
Loss for the period from operations held for sale 11 (21,306) (66,883)
LOSS FOR THE PERIOD (46,296) (111,670)
Other comprehensive loss, net of income tax
Items that may be reclassified subsequently to profit or
loss
Exchange differences on translating foreign operations (3,672) 18,933
Total comprehensive loss for the period (49,968) (92,737)
Loss for the period attributable to:
Owners of the parent (46,296) (111,670)
Non-controlling interests - -
(46,296) (111,670)
Total comprehensive loss attributable to:
Owners of the parent (49,968) (92,737)
Non-controlling interests - -
(49,968) (92,737)
Loss per share 12
From continuing operations and operations held for sale
Basic and diluted (cents per share) 4.42 14.39
From continuing operations
Basic and diluted (cents per share) 2.38 5.77
The accompanying notes are an integral part of these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2013
31 Dec 2013 30 June 2013
Note $'000 $'000
ASSETS
Non-current assets
Development, exploration and evaluation assets 6 274,190 279,078
Property, plant and equipment 7 17,019 18,846
Intangible assets 15,087 16,078
Other receivables 3,358 3,567
Other financial assets 2,678 2,989
Restricted cash 3,939 4,187
Deferred tax assets 2,714 2,885
Total non-current assets 318,985 327,630
Current assets
Inventories 544 1,096
Trade and other receivables 4,645 3,267
Other financial assets - 3,318
Cash and cash equivalents 4,067 20,995
9,256 28,676
Assets classified as held for sale 8 32,232 71,093
Total current assets 41,488 99,769
Total assets 360,473 427,399
LIABILITIES
Non-current liabilities
Deferred consideration - 30,000
Provisions 4,647 4,903
Total non-current liabilities 4,647 34,903
Current liabilities
Deferred consideration 9 30,000 -
Trade and other payables 5,582 10,837
Borrowings 10 9,160 2,088
Provisions 343 398
Current tax liabilities 1,489 1,534
46,574 14,857
Liabilities associated with assets held for sale 8 14,724 35,171
Total current liabilities 61,298 50,028
Total liabilities 65,945 84,931
NET ASSETS 294,528 342,468
EQUITY
Issued capital 935,891 935,891
Accumulated deficit (753,831) (707,535)
Reserves 111,893 113,537
Equity attributable to owners of the parent 293,953 341,893
Non-controlling interests 575 575
TOTAL EQUITY 294,528 342,468
The accompanying notes are an integral part of these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER 2013
Issued Accumulated Share Capital Foreign Attributable Non- Total
capital deficit based profits currency to owners of controlling equity
payment reserve translation the parent interests
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 July 2013 935,891 (707,535) 82,438 91 31,008 341,893 575 342,468
Total comprehensive loss for the period - (46,296) - - (3,672) (49,968) - (49,968)
Loss for the period – continuing operations - (24,990) - - - (24,990) - (24,990)
Loss for the period – operations held for sale - (21,306) - - - (21,306) - (21,306)
Other comprehensive loss, net of tax - - - - (3,672) (3,672) - (3,672)
935,891 (753,831) 82,438 91 27,336 291,925 575 292,500
Share based payments - - 2,028 - - 2,028 - 2,028
Balance at 31 December 2013 935,891 (753,831) 84,466 91 27,336 293,953 575 294,528
Balance at 1 July 2012 791,102 (564,800) 87,180 91 63,119 376,692 575 377,267
Total comprehensive loss for the period - (111,670) - - 18,933 (92,737) - (92,737)
Loss for the period – continuing operations - (44,787) - - - (44,787) - (44,787)
Loss for the period – operations held for sale - (66,883) - - - (66,883) - (66,883)
Other comprehensive loss, net of tax - - - - 18,933 18,933 - 18,933
791,102 (676,470) 87,180 91 82,052 283,955 575 284,530
Shares issued for capital raising 54,250 - - - - 54,250 - 54,250
Share issue costs (2,211) - - - - (2,211) - (2,211)
Share based payments - - 481 - 481 - 481
Share options expired - 4,554 (4,554) - - - - -
Balance at 31 December 2012 843,141 (671,916) 83,107 91 82,052 336,475 575 337,050
The accompanying notes are an integral part of these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2013
Six months ended Six months ended
31 December 31 December
2013 2012
$'000 $'000
Cash Flows from Operating Activities
Receipts from customers 23,490 90,279
Payments to employees and suppliers (45,573) (121,802)
Cash used in operations (22,083) (31,523)
Interest received 495 342
Interest paid (177) (676)
Income taxes paid - -
Net cash used in operating activities (21,765) (31,857)
Cash Flows from Investing Activities
Purchase of property, plant and equipment - (2,395)
Increase in restricted cash - (1,475)
Proceeds from the sale of property, plant and equipment - -
Purchase of mineral properties - (9,802)
Payments for exploration and evaluation assets (1,624) (11,749)
Increase in other financial assets 3,428 (724)
Payments for development assets (4,038) (17,993)
Net cash used in investing activities (2,234) (44,138)
Cash Flows from Financing Activities
Proceeds from the issue of shares and options, net of costs - 53,631
Share issuance costs - (2,221)
Proceeds received from BHE - 20,000
Repayment of borrowings (12,355) (157)
Proceeds from borrowings 10,664 4,897
Finance lease repayments (54) (911)
Net cash (used in) / generated by financing activities (1,745) 75,239
NET DECREASE IN CASH AND CASH EQUIVALENTS (25,744) (756)
Cash and cash equivalents at the beginning of the half-year 29,938 19,523
Foreign exchange differences 30 (475)
Cash and cash equivalents at the end of the half-year 13 4,224 18,292
The accompanying notes are an integral part of these condensed consolidated financial statements
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR REPORT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2013
1. CORPORATE INFORMATION
The financial report of Coal of Africa Limited ("CoAL" or the "Company") for the half-year ended 31 December 2013
was authorised for issue in accordance with a resolution of the directors on 9 March 2014. CoAL is a company
incorporated in Australia and limited by shares, which are publicly traded on the Australian Securities Exchange
("ASX"), the AIM market of the London Stock Exchange ("AIM") and the Johannesburg Stock Exchange ("JSE").
The nature of the operations and principal activities of the Company and its subsidiaries (the "Group" or the
"Consolidated Entity") are described in the Directors' Report.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The half-year financial report is a general purpose financial report prepared in accordance with the requirements of the
Corporations Act 2001 and AASB 134: Interim Financial Reporting. Compliance with AASB 134 ensures compliance
with International Financial Reporting Standard IAS 34 ‘Interim Financial Reporting'. The half-year report does not
include notes of the type normally included in an annual financial report and should be read in conjunction with the
most recent annual financial report.
Basis of preparation
The half-year condensed consolidated financial statements have been prepared on the basis of historical cost, except
for the revaluation of financial instruments. Cost is based on the fair values of the consideration given in exchange for
assets.
All amounts are presented in United States dollars, unless otherwise noted.
The accounting policies and methods of computation adopted in the preparation of the half-year financial report are
consistent with those adopted and disclosed in the company's 2013 annual financial report for the financial year ended
30 June 2013, except for the impact of the Standard and Interpretations described below. These accounting policies
are consistent with the Australian Accounting Standards and with International Financial Reporting Standards ("IFRS").
The Group has revised the presentation of its condensed consolidated financial statements from those reported as at
and for the half-year ended 31 December 2012 to take into account the decision to classify its thermal assets as
operations held for sale. These revisions had no impact on net loss, total assets or total equity.
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board ("the AASB") that are relevant to their operations and effective for the current reporting period.
New and revised Standards and amendments thereof and Interpretations effective for the current half-year that are
relevant to the Group include:
- AASB 10 'Consolidated Financial Statements'
- AASB 11 ‘Joint Arrangements'
- AASB 12 ‘Disclosure of Interests in Other Entities'
- AASB 127 ‘Separate Financial Statements'
- AASB 13 ‘Fair value Measurement'
The adoption of all the new and revised Standards and Interpretations has not resulted in any changes to the Group's
accounting policies and has no effect on the amounts reported for the current or prior half-years. However, the
application of AASB 12 has resulted in changes to the Group's presentation of, or disclosure in, its half-year financial
statements.
AASB 12 requires the extensive disclosure of information that enables users of financial statement to evaluate the
nature of, and risks associated with, interest in other entities and the effects of those interests on its financial position,
financial performance and cash flows.
In general, the application of AASB 12 has resulted in more extensive disclosure in the half-year report.
AASB 13 Fair value measurement, which has been issued and is effective for accounting periods beginning on or after
1 January 2013, establishes a single source of guidance under accounting standards for all fair value measurements.
AASB 13 does not change when an entity is required to use fair value, but rather provides guidance on how to
measure fair value under AASBs when fair value is required or permitted. The application of AASB 13 did not have a
material impact on the amounts recognised in the Consolidated Interim Financial Statements.
3. GOING CONCERN
These condensed consolidated financial statements have been prepared on the going concern basis, which
contemplates the continuity of normal business activities and the realisation of assets and the settlement of liabilities in
the normal course of business.
The Consolidated Entity has incurred a net loss after tax for the 6 months ended 31 December 2013 of US$46.3
million (31 December 2012: loss of US$111.7 million), including a non-cash impairment of US$16.5 million on the
Mooiplaats Colliery, realised and unrealised foreign exchange losses of US$12.6 million and depreciation and
amortisation charges of US$1.3 million. During the 6 months ended 31 December 2013, net cash outflows from
operating activities were US$21.8 million (31 December 2012 net outflow: US$31.8 million) and net cash outflows from
investing activities were US$2.2 million (31 December 2012 net outflow: US$44.1 million). As at 31 December 2013
the Consolidated Entity had a net current liability position of US$37.3 million (30 June 2013: net current assets of
US$13.8 million), excluding assets and liabilities classified as held for sale.
As part of the process to raise additional funding for the business during the reporting period, the Company has performed
the following fundraising activities:
- In October 2013, the Consolidated Entity secured a working capital facility with Investec Bank Limited for ZAR210 million
(US$20.0 million) of which ZAR107 million (US$10.2 million) was drawn down on 30 October 2013. Refer to Note 10 for further
deatails of the facility.
During the period ended 31 December 2013 and up to the date of this report the Company also identified certain key deliverables
to ensure that the Consoldiated Entity continues as a going concern. These include:
- The sale of the Woestalleen Complex was finlaised following receipt of Section 11 approval from the Department of Mineral
Resources on 31 January 2014. The sale consideration of ZAR80 million (US$7.6 million) was received on 6 March 2014;
- The Company commenced a process for the sale of the Mooiplaats Colliery; and
- The Company commenced negotiations with Rio Tinto with regard to the payment of US$30 million (refer NOte 9) that will become
due within the next 12 months.
Over the next three to twelve months, the Directors have identified certain key deliverables to ensure that the Consolidated
Entity continues as a going concern. The ability of the Consolidated Entity to continue as a going concern and to pay their debts
as and when they fall due is dependent on:
- The successful conclusion of additional funding from either financial institutions or the equity markets to meet planned
commitments;
- The successful conclusion of negotiations with Rio Tinto with respect to the timing of the settlement of the US$30.0 million
liability in order to match the Company's available cash resources; and
- The sale of other non-core assets during the next twelve months (as contemplated in Note 11) including the release of the
associated cash backed rehabilitation guarantees for these assets and the receipt of proceeds from the sale of other financial
assets.
At the date of this report and having considered the above factors, the Directors are confident that the Consolidated Entity
will achieve the matters set out above and accordingly will be able to continue as a going concern.
In the event that the Consolidated Entity does not achieve successful outcomes in relation to the matters set out
above, significant uncertainty would exist as to the ability of the Consolidated Entity to continue as a going concern and,
therefore, the Consolidated Entity may be unable to realise its assets and discharge their liabilities in the normal course of
business and at the amounts stated in the financial report.
The half-year financial report does not include adjustments relating to the recoverability and classification of recorded asset
amounts, nor to the amounts and classification of liabilities that might be necessary should the Consolidated Entity not continue
as a going concern.
4. DIVIDENDS
No dividend has been paid or is proposed in respect of the half-year ended 31 December 2013 (2012: None).
5. ISSUED CAPITAL
31 Dec 2013
$'000
1,048,368,613 (2012: 800,951,043) fully paid ordinary shares 935,891
There were no changes to the issued capital during the half-year.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Options
The following unlisted options to subscribe for ordinary fully paid shares are outstanding at 31 December 2013:
Number Issued Exercise Price Expiry Date
3,000,000 A$2.74 30 November 2014
818,500 A$1.90 30 June 2014
2,500,000 A$1.20 9 November 2015
1* GBP0.60 1 November 2014
1,441,061 A$1.40 30 September 2015
2,670,000 ZAR7.60 30 June 2016
3,500,000 GBP0.25 30 November 2015
20,000,000** ZAR1.32 21 October 2018
* 1 Option to subscribe for 50 million ordinary shares for 60 pence each between 1 November 2010 and
1 November 2014 as approved by shareholders on 22 April 2010.
** Issued to Investec as part of the short term bridging facility and vest six months after granting.
6. DEVELOPMENT, EXPLORATION AND EVALUATION ASSETS
31 Dec 2013
$'000
Development, exploration and evaluation assets comprise:
Exploration and evaluation assets 144,148
Development assets 130,042
Balance at end of period 274,190
A reconciliation of development, exploration and evaluation assets is presented below:
Exploration and evaluation assets
Balance at beginning of period 148,131
Additions 1,806
Foreign exchange differences (5,789)
Balance at end of period 144,148
Development assets
Balance at beginning of period 130,947
Additions 6,302
Foreign exchange differences (7,207)
Balance at end of period 130,042
The development asset, comprising the Vele project, has been assessed for impairment by comparing the carrying
value against the value-in-use calculations of the project.
Value-in-use is calculated based on the present value of cash flow projections over the expected life of the
development project. The discount rate applied in the value-in-use is 10.33% (30 June 2013 - 10%).
Based on the value-in-use projection, no impairment has been recognised on the Vele development asset.
Recoverability of the carrying value of interests in exploration and development assets is subject to the
successful development and exploitation of the exploration and development properties or alternatively, the
sale of these tenements at amounts at least equal to the book values. The ability of the Consolidated Entity
to fund the successful development and exploitation of the exploration and development properties is dependent
on the going concern assumptions set out in Note 3 'Going Concern'.
7. PROPERTY, PLANT AND EQUIPMENT
Mining Land and Leasehold Motor Other Total
property, buildings improve- vehicles
plant and ments
equipment
$'000 $'000 $'000 $'000 $'000 $'000
December 2013
Cost
At beginning of period 465 17,481 572 888 2,178 21,584
Additions - 9 5 - 1 15
Foreign exchange (28) (1,036) (32) (53) (156) (1,305)
At end of period 437 16,454 545 835 2,023 20,294
Accumulated depreciation
At beginning of period 166 406 517 269 1,380 2,738
Depreciation charge 23 252 52 132 266 725
Exchange differences (12) (34) (32) (21) (89) (188)
At end of period 177 624 537 380 1,557 3,275
Net carrying value at end of
period 260 15,830 8 455 466 17,019
June 2013
Cost
At beginning of year 427,898 24,348 678 1,839 2,817 457,580
Additions 3,626 449 - 340 428 4,843
Transfers - (929) - - - (929)
Assets held for sale (376,955) (2,608) - (956) (573) (381,092)
Exchange differences (54,104) (3,779) (106) (335) (494) (58,818)
At end of year 465 17,481 572 888 2,178 21,584
Accumulated
depreciation
At beginning of year 188,777 1,325 462 694 1,445 192,703
Amortisation 13,577 - - - - 13,577
Depreciation charge 11,968 1,135 142 244 666 14,155
Assets held for sale (176,290) (1,741) - (530) (432) (178,993)
Exchange differences (37,866) (313) (87) (139) (299) (38,704)
At end of year 166 406 517 269 1,380 2,738
Accumulated Impairment
At beginning of year 123,236 - - - - 123,236
Impairment charge 48,545 - - - - 48,545
Assets held for sale (166,399) - - - - (166,399)
Exchange differences (5,382) - - - - (5,382)
At end of year - - - - - -
Net carrying value at end of
year 299 17,075 55 619 798 18,846
8. ASSETS HELD FOR SALE
31 Dec 2013 30 June 2013
$'000 $'000
Carrying amounts of
Holfontein Investments Proprietary Limited (‘Holfontein') - -
Langcarel Proprietary Limited (‘Mooiplaats') 19,040 34,934
NuCoal Mining Proprietary Limited (‘Woestalleen') (1,532) 988
17,508 35,922
Assets classified as held for sale
Holfontein - -
Mooiplaats 22,802 55,996
Woestalleen 9,430 15,097
32,232 71,093
Liabilities associated with assets held for sale
Holfontein - -
Mooiplaats (3,762) (21,062)
Woestalleen (10,962) (14,109)
(14,724) (35,171)
17,508 35,922
Holfontein
The Company has signed an Option Agreement to dispose of the asset. The option holder paid ZAR5.0 million
(US$0.5 million) in December 2013. The option grants the holder an exclusive right to purchase the Holfontein
equity and claims for ZAR50.0 million (US$4.8 million) for one year which can be extended on payment of further
option fees.
Mooiplaats
As described in Note 11, the Company is seeking to dispose of its thermal assets which include the Mooiplaats
Colliery. The Company expects to recover the carrying value through the disposal of the project.
The major classes of assets and liabilities of Mooiplaats at the end of the reporting period are as follows:
Assets classified as held for sale
Property, plant and equipment 17,369 35,100
Other financial assets 2,112 2,043
Restricted cash 1,486 1,580
Inventories 1,555 2,021
Trade and other receivables 123 9,267
Cash and cash equivalents 157 5,985
22,802 55,996
Liabilities classified as held for sale
Interest bearing liabilities - 12,769
Provisions 2,943 3,414
Trade payables and accrued expenses 819 4,879
3,762 21,062
Net assets of Mooiplaats 19,040 34,934
Woestalleen
CoAL had agreed to sell the Woestalleen processing complex and the undeveloped Opgoedenhoop mining right.
During the six months ended December 2013, the Company made good progress in satisfying the suspensive
conditions for the disposals and at the end of the period, only the conditions requiring ministerial consent in terms of
Section 11 of the Mineral and Petroleum Resources Development Act remained outstanding. The Section 11 with
respect to the Woestalleen processing complex was received subsequent to the period (refer Note 15).
The major classes of assets and liabilities of Woestalleen at the end of the reporting period are as follows:
31 Dec 2013 30 June 2013
$'000 $'000
Assets classified as held for sale
Property, plant and equipment 565 600
Other financial assets 2,947 3,133
Restricted cash 556 578
Inventories 2,745 3,412
Trade and other receivables 2,617 4,416
Cash and cash equivalents - 2,958
9,430 15,097
Liabilities classified as held for sale
Interest bearing liabilities 866 921
Provisions 8,576 7,422
Trade payables and accrued expenses 1,520 5,766
10,962 14,109
Net (liabilities) / assets of Woestalleen (1,532) 988
9. DEFERRED CONSIDERATION
Notwithstanding that the Company is currently in negotiations with Rio Tinto to defer the payments with respect to the
US$30.0 million that is due in October 2014, the payable has been reflected as current in the balance sheet as at
31 December 2013, as no formal agreement to defer the payment has been reached yet.
The Company is confident that they will be successful in negotiation the deferment of the payment.
10. BORROWINGS
Borrowings are made up as follows:
31 Dec 2013 30 Jun 2013
$'000 $'000
Investec Bank facility 8,954 -
Other 206 2,088
9,160 2,088
The Company, through its wholly owned subsidiary GVM Metals Administration (South Africa) (Pty) Ltd has secured
an 18-month, ZAR210 million (approximately US$20.0 million) working capital facility from Investec Bank Limited
(Investec).
The principal terms of the loan include a margin of 500 basis points, pledge and cession of the shares and loan
accounts in the major operating subsidiaries of the Group. In addition, CoAL will issue 20 million options to Investec
which are exercisable at ZAR1.32 before October 2018.
The effective interest rate is 21.02% based on the expected payments.
The fair value of the option component was determined using the following assumptions:
- a risk-free rate of 6.6%
- a volatility index of 55.0%
- a dividend yield of 0%
- the options vest on 21 April 2014.
31 Dec 2013
$'000
Investec facility received 10,234
Transaction costs - Option component accounted for in equity (1,430)
8,804
Adjustment for effective interest 150
8,954
The facility is subject to certain covenants associated with a facility of this nature. The covenants include amongst
others, maintaining a certain minimum cash level. As at the date of this report, there have been no breaches of
covenants applicable to the loan.
11. OPERATIONS HELD FOR SALE
11.1 Holfontein (Pty) Ltd (‘Holfontein')
The Company has signed an Option Agreement to dispose of the asset. The option holder paid ZAR5.0 million
(US$0.5 million) in December 2013. The option grants the holder an exclusive right to purchase the Holfontein equity and
claims for ZAR50.0 million (US$4.8 million) for one year which can be extended on payment of further option fees.
11.2 Disposal of NuCoal Mining (Pty) Ltd (‘Woestalleen')
CoAL had agreed to sell the Woestalleen processing complex and the undeveloped Opgoedenhoop mining right.
During the six months ended December 2013, the Company made good progress in satisfying the suspensive
conditions for the disposals and at the end of the period, only the conditions requiring ministerial consent in terms of
Section 11 of the Mineral and Petroleum Resources Development Act remained outstanding. The Section 11 with
respect to the Woestalleen processing complex was received subsequent to the period (refer Note 15).
Details of the assets and liabilities held for sale are disclosed in Note 8.
11.3 Plan to dispose of Langcarel (Pty) Ltd (‘Mooiplaats')
The disposal process continued during the period and formal offers from prospective buyers are expected by the end
of the March 2014 quarter, with disposal agreements thereafter. The Company expects to complete this transaction
during the 2014 calendar year.
11.4 Analysis of loss for the year from operations classified as held for sale
The combined results of the operations held for sale included in the loss for the period are set out below. The
comparative losses and cash flows from operations held for sale have been re-presented to include those operations
classified as held for sale in the current period.
Six months Six months
ended ended
31 Dec 2013 31 Dec 2012
$'000 $'000
Loss for the period from operations held for sale
Revenue 1,778 87,255
Other gains 1,501 549
3,279 87,804
Expenses (24,585) (162,538)
Loss before tax (21,306) (74,734)
Attributable income tax credit - 7,851
Loss for the period from operations held for sale (attributable to
owners of the parent) (21,306) (66,883)
Cash flows from operations held for sale
Net cash outflows from operating activities (3,479) (20,425)
Net cash outflows from investing activities 329 (4,222)
Net cash outflows from financing activities (12,409) 3,829
Net cash outflows (15,559) (20,818)
These operations have been classified and accounted for as a
disposal group held for sale since 30 June 2013 (see Note 8).
12. LOSS PER SHARE
Six months Six months
ended ended
31 Dec 2013 31 Dec 2012
Cents per share Cents per share
Basic loss per share
From continuing operations 2.38 5.77
From operations held for sale 2.04 8.62
4.42 14.39
12.1 Basic loss per share
$'000 $'000
Loss for the period attributable to owners of the parent (46,296) (111,670)
Loss for the period from operations held for sale 21,306 66,883
Loss used in the calculation of basic loss per share from continuing
operations (24,990) (44,787)
‘000 shares ‘000 shares
Weighted number of ordinary shares
Weighted average number of ordinary shares for the purposes of basic
loss per share 1,048,368 775,886
12.2 Diluted loss per share
Diluted loss per share is calculated by dividing loss attributable to owners of the Company by the weighted average
number of ordinary shares outstanding during the period plus the weighted average number of diluted ordinary shares
that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
As at 31 December 2013, 21,987,489 options (31 December 2012 – 15,929,562 options) and the 20 million options
issued to Investec were excluded from the computation of the loss per share as their impact is anti-dilutive.
Furthermore at 31 December 2013 and 2012 one option issued to Firefly to acquire 50 million shares (see note 5)
was also excluded from the computation of the loss per share as the impact is anti-dilutive.
Headline loss per share (In line with JSE listing requirements)
The calculation of headline loss per share at 31 December 2013 was based on the headline loss attributable to
ordinary equity holders of the Company of US$29.8 million (2012: US$61.7 million) and a weighted average number of
ordinary shares outstanding during the period ended 31 December 2013 of 1,048,368,613 (2012: 775,886,462).
The adjustments made to arrive at the headline loss are as follows:
Six months Six months
ended ended
31 Dec 2013 31 Dec 2012
$'000 $'000
Loss for the period attributable to ordinary shareholders 46,296 111,670
Adjust for:
Impairment losses (16,453) (50,000)
Headline earnings 29,843 61,670
Headline loss per share (cents per share) 2.85 7.95
13. CASH AND CASH EQUIVALENTS
31 December 30 June
2013 2013
$'000 $'000
Bank balances 4,067 20,995
Bank balances included in a disposal group held for sale (refer Note 8) 157 8,943
4,224 29,938
Restricted cash 3,939 4,187
Restricted cash included in a disposal group held for sale (refer Note 8) 2,042 2,158
5,981 6,345
14. CONTINGENT LIABILITIES
In accordance with normal industry practice, the Company has agreed to provide financial support to its controlled
entities.
The Group is currently involved in litigation as outlined below (US$ amounts presented within have been computed
using the exchange rate as at 31 December 2013 unless otherwise stated):
Envicoal Proprietary Limited / NuCoal Mining Proprietary Limited
Envicoal launched arbitration proceedings against NuCoal claiming that NuCoal failed to deliver coal as prescribed in
terms of the agreement concluded between the parties. As a result, Envicoal has claimed damages to the value of
ZAR115.7 million (US$11.0 million), alternatively ZAR50.6 million (US$4.8 million). Both amounts exclude VAT and
interest. The arbitration proceedings have commenced but were postponed until April 2014.
The Group has contingent liabilities as listed below:
Ferret Mining Proprietary Limited
During the period, Ferret's 26% shareholding in Mooiplaats Mining Limited was re-instated. Although they are not
entitled to any assets or claims in the Mooiplaats group, they are entitled to receive ZAR10.0 million (US$1.0 million)
upon the successful disposal of the Mooiplaats Colliery.
There are no other significant contingent liabilities as at 31 December 2013.
15. EVENTS SUBSEQUENT TO REPORTING DATE
- On 31 January 2014, the Department of Mineral Resources ("DMR") granted Section 11 approval in terms of the
MPRDA for the disposal of Woestalleen Complex. The sale consideration of ZAR80 million (US$7.6 million) was
received on 6 March 2014.
- David Brown was appointed as CEO and Executive Director and Bernard Pryor was appointed Chairman, effective
1 February 2014.
- Appointment of Sedgman as the engineer for the FEED of the Vele Colliery plant modification.
16. SEGMENTAL INFORMATION
The Group has three reportable segments: Exploration, Development and Mining.
The Exploration segment is involved in the search for resources suitable for commercial exploitation, and the
determination of the technical feasibility and commercial viability of resources. As at 31 December 2013, projects
within this reportable segment include three exploration and development stage coking and thermal coal complexes,
namely the Chapudi Complex (which comprises the Chapudi project, the Chapudi West project and the
Wildebeesthoek project), the Soutpansberg Complex (which comprises the Voorburg project, the Mt Stuart project and
the Jutland project) and the Makhado Complex (comprising the Makhado project, the Makhado Extension project and
the Generaal project).
The Development segment is engaged in establishing access to and commissioning facilities to extract, treat and
transport production from the mineral reserve, and other preparations for commercial production. As at 31 December
2013 projects included within this reportable segment include one coking coal project, namely the Vele Colliery, in the
early operational and development stage.
The Mining segment is involved in day to day activities of obtaining a saleable product from the mineral reserve on a
commercial scale and included the Mooiplaats Colliery and the Woestalleen Colliery. As of 30 June 2013 the
Mooiplaats Colliery and the Woestalleen Colliery has been classified as operations held for sale after a decision by the
Company to dispose of its thermal assets (refer Notes 8 and 11).
The Group evaluates performance on the basis of segment profitability, which represents net operating (loss) / profit
earned by each reportable segment.
Each reportable segment is managed separately because, amongst other things, each reportable segment has
substantially different risks.
The Group accounts for intersegment sales and transfers as if the sales or transfers were to third parties, ie at current
market prices.
The Group's reportable segments focus on the stage of project development and the product offerings of coal mines in
production.
Operations
Continuing operations held-for-sale
For the six months ended Exploration Development Mining Total
31 December 2013 $'000 $'000 $'000 $'000
Revenues from external customers(1) - - 1,778 1,778
Inter-segment revenues - - 3,755 3,755
Revenue - - 5,533 5,533
Segment loss 148 1,196 21,306 22,650
Items included within the Group's measure of
segment profitability
- Depreciation and amortisation 10 33 - 43
- Impairment - - 16,453 16,453
- Finance cost / (income) (net) 3 34 (193) (156)
1. Revenues represent sale of product
Segment assets 151,548 134,104 32,232 317,884
Items included within the Group's measure of
segment assets
- Additions to non-current assets 1,806 6,302 - 8,108
Segment liabilities 2,276 4,661 14,724 21,661
Operations
Continuing operations held-for-sale
For the six months ended Exploration Development Mining Total
31 December 2012 $'000 $'000 $'000 $'000
Revenues from external customers(1) - - 87,255 87,255
Inter-segment revenues - - 27,316 27,316
Revenue - - 114,571 114,571
Segment loss 521 761 74,732 76,014
Items included within the Group's measure of
segment profitability
- Depreciation and amortisation 6 35 18,731 18,772
- Impairment - - 50,000 50,000
- Finance cost (net) - - 844 844
1. Revenues represent sale of product
Segment assets 169,727 146,588 106,715 423,030
Items included within the Group's measure of
segment assets
- Additions to non-current assets 4,219 15,288 1,984 21,491
Segment liabilities 6,339 8,420 87,831 102,590
Reconciliations of the total segment amounts to respective items included in the consolidated financial statements are
as follows:
Six months Six months
ended ended
31 Dec 2013 31 Dec 2012
$'000 $'000
Total loss for reportable segments 22,650 76,014
Reconciling items:
Unallocated corporate (income) / costs 9,841 15,343
Depreciation 1,243 458
Foreign exchange loss 12,562 19,855
Loss before taxation 46,296 111,670
Total segment assets 317,884 423,030
Reconciling items:
Unallocated property, plant and equipment 12,991 19,156
Intangible assets 15,087 18,845
Other financial assets 271 6,331
Other receivables 3,358 4,154
Unallocated current assets 10,882 28,228
Total assets 360,473 499,744
Total segment liabilities 21,661 102,590
Reconciling items:
Investec facility 8,954 -
Unallocated liabilities 35,330 60,104
Total liabilities 65,945 162,694
17. FINANCIAL INSTRUMENTS
This note provides information about how the Group determines fair values of various financial assets and financial
liabilities.
17.1 Fair value of the Group's financial assets and financial liabilities that are measure at fair value on a recurring basis
Some of the Group's financial assets and financial liabilities are measured at fair value at the end of each reporting
period. The following table gives information about how the fair values of these financial assets and financial liabilities
are determined (in particular, the valuation technique(s) and inputs used).
Relationship
Valuation of
technique(s) Significant unobservable
Financial assets / Fair value and key unobservable inputs to fair
financial liabilities Fair value as at hierarchy input(s) input(s) value
31 Dec 30 Jun
2013 2013
1. Other financial Assets - Assets - Level 2 Value N/A N/A
assets – Unlisted $2.7m $6.3m certificate
Investments obtained
from
investment
institution
2. Other financial Assets - Assets - Level 1 Quoted N/A N/A
assets – Listed nil $3.4m prices in an
Investments active
market
3. Receivables – Assets - Assets - Level 1 Quoted N/A N/A
Listed Investments $2.1m nil prices in an
active
market
17.2 Fair value of the Group's financial assets and financial liabilities that are not measured at fair value on a recurring
basis (but fair value disclosures are required)
Except as detailed in the following table, the directors consider that the carrying amounts of financial assets and
financial liabilities recognised in the condensed consolidated financial statements approximate their fair values.
31 Dec 2013 30 Jun 2013
Carrying Fair Carrying Fair
amount value amount value
$'000 $'000 $'000 $'000
Financial liabilities
Financial liabilities held at amortised cost:
- Loans from other entities 8,954 8,804 - -
DIRECTORS' DECLARATION
The Directors declare that in the directors' opinion,
1. The condensed financial statements and notes of the consolidated entity are in accordance with the
following:
a. complying with accounting standards and the Corporations Act 2001; and
b. giving a true and fair view of the consolidated entity's financial position as at 31 December 2013 and
of its performance for the half-year ended on that date.
2. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors, made pursuant to section 303(5)
of the Corporations Act 2001.
On behalf of the Directors
David Brown
Director
Dated at Johannesburg, South Africa, this 9th day of March 2014.
AUDITORS' INDEPENDENCE DECLARATION
The auditors' independence declaration can be viewed in the pdf-version of the interim financial statements on the Company's
website: www.coalofafrica.com
INDEPENDENT AUDITORS' REVIEW REPORT
The independent auditors' review report can be viewed in the pdf-version of the interim financial statements on the Company's
website: www.coalofafrica.com
Date: 10/03/2014 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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